Excluding the political crisis, the two indicators published this Friday, June 28 by INSEE could have delighted the markets: inflation slowed again in June to its lowest level since September 2021, to + 2.1% over one year and prices almost stable over one month. Inflation is falling much faster than predicted by INSEE, which in February predicted +2.6% in June. And household consumption clearly restarted in May (+1.5% in volume over April), after a fall of 0.9% the previous month, even if over a year it remains in small shape (+0.9% ).
However, political concerns prevail and the Paris Stock Exchange opened in the red again on Friday. The CAC 40 index, which was above 8,000 points on June 7, fell back to 7,493 points on Friday morning, even lower than during the plunge that followed the announcement of the dissolution. That is a fall of more than 6% in twenty days. The interest rate gap between French debt and German debt over 10 years, the “spread”, continued to climb to a level not seen for twelve years.
Only 32% of French people consider it appropriate to make major purchases
The global financial markets, which are scrutinizing the French election, do not dare to make any bets. “We won’t know the full results until the runoff on July 7, but it will give us a better idea of the likely results in terms of a majority, if there is one.”write economists at Deutsche Bank in a note on Friday. “Ahead of Sunday’s first round, French assets continued to lose ground, with the Franco-German 10-year spread closing above the 80 basis point mark for the first time since 2012. In absolute terms, the The French 10-year OAT increased by 3.8 basis points to reach 3.26%, its highest level since November. Stocks also fell, with the CAC 40 down 1.03%, meaning it is now less than 0.4% worth €1.5 billion.”
Another unfavourable indicator published on Wednesday, household morale, which measures their confidence in the future economy and their ability to maintain their standard of living, deteriorated in June, to 89, down one point compared to May, and still remains well below its long-term average, set at 100. The French respondents are taking a wait-and-see attitude, with only 32% considering it a good time to make major purchases. A sign of their gloom, their opinion on their future savings capacity has also declined significantly, as has their vision of their future standard of living, with pessimists now outweighing optimists. A growing share anticipates an acceleration in prices over the next 12 months, which is increasing their concerns about their purchasing power, even if those concerning unemployment are falling slightly. It should be noted that the responses to this survey were collected from 28 May to 17 June 2024, therefore partly after the announcement of the dissolution.
And yet, inflation confirms its slow decline. A year ago, in June 2023, it still reached 4.5%. The decline in June can be explained by both a slowdown in the rise in energy and food prices. The cost of food products increased by 0.8% over one year in June, compared to 1.3% in May, that of energy increased by 4.8%, while it still increased by 5 .7% a month earlier. For the record, in February 2023 inflation reached a peak of 7.3% over one year.
